A Flexible Premium Annuity Is Perfect When Your Income Is Unpredictable

A flexible premium annuity gives you much freedom in your retirement provision effort. However, it demands self discipline of steel. It is perfect when your sources of income are unpredictable.

In your own mindset retirement provision must be a top priority. Your budget and expenditure tightly managed, so that you can contribute every month what you managed to save that month.

This type of annuity is really flexible. You can contribute a fixed amount regularly for several months and then contribute nothing for some time. The annuity cannot lapse in such a case.

You can make multiple contributions during any month. There is usually the proviso that an additional contribution must be larger than a set amount. If you receive a sudden windfall or inheritance, you can contribute that too to your annuity.

Some time ago a relative came to me for advice. It was clear that she made very little retirement provision to date and her own retirement was a mere four years away. We worked through a lot of tears and emotion. Finally she accepted that she'll have to moderate her consumption and make retirement provision her priority.

We decided on a modest monthly premium, but with her commitment to contribute it as a matter of priority. She is not computer literate and I helped her to set up the annuity via the Internet – and thus saved on commission payable.

She's also renting out an apartment, but the rental agency failed to get tenants on two occasions and the apartment stayed empty for several months. This way she was losing desperately needed income. To help out I actively advertised, dropped the price, and got tenants and is currently managing the renting of the apartment - hopefully on a temporary basis. The net income is transferred monthly as a special contribution to the annuity.

In a very sluggish property market she was able to sell a property albeit at a very low price, and the net income of this sale was also contributed as a lump sum to the flexible premium annuity.

When I scrutinized the statement to date for this annuity earlier this month, my first thought was that there must be a mistake. But when I analyzed the statement I marveled once again at the powerful growth of regular savings and the tax-deferred income earned by such an annuity.

She's not going to retire comfortably in three year's time, but the situation is not as desperate as it was a year ago. I don't think any other product could have achieved a similar or better outcome for her.